Sound effects, soundtrack, art direction, technical polish (no loading, solid framerate, no bugs, etc), gameplay, level design, enemy AI, puzzles, story, character, writing / dialog, voice acting, network / social / multiplayer features, and also graphical production values (high res, dynamic lighting, shadows, bump-mapping, volumetric, and other such technical terms) all improve the experience.
Different things can be more important in that vast list of things that improve the experience depending on the consumer.
What Nintendo is saying poorly is that they believe the graphical barrier is so well invested that push it significantly higher at this point wont yield a proportionally better experience. There is a bigger need to invest in gameplay and innovation to make the experience fresher.
I get and appreciate their philosophy but it also pisses me off when they release something as ugly as Wario Ware when they are capable of producing games that look as beautiful as Mario Galaxy, Pikmin, Metroid Prime, and Zelda to name a few.
I have a love/hate relationship with Nintendo as a long time consumer of their products.
